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The city will likely lose its state aid as a result of the decision due to a state law passed over the summer designed to discourage the city from declaring bankruptcy. Next week, the state legislature is scheduled to consider putting Harrisburg into receivership, Bloomberg BusinessWeek reports, a move that comes on the heels of the city council's rejection of recovery plans drafted by consultants working for the state and Mayor Linda Thompson.

Thompson's office is arguing that the move was illegal, according to the The Patriot-News, saying that while the council can request that the mayor and city solicitor file for bankruptcy, it can't indepdently do so on its own. State Sen. Jeff Piccola is also saying the move is illegal because under state law, third-class cities -- a category that includes Harrisburg -- can't file indepdently file bankruptcy, the Associated Press reports.

Meanwhile, attorney Schwartz says any state takeover of city finances is unconstituional -- and he may fight it in court, the Pittsburgh Post-Gazette reports.

A year ago, Governing's John Buntin wrote extensively about how a disastrous incinerator project put Harrisburg under crushing debt. Governing will provide updates throughout the day as this story progresses.